NO BAILOUT FOR ESCONDIDO CHAMBER

It’s nothing less than a small town replay of the bailouts of General Motors and Wall Street.

Skeptical taxpayers are told that their money is being “invested” to save a business that is integral and critical to the overall health of the community. Sure, there was financial mismanagement but, once this financial rescue is implemented, changes will be made – things will be different in the future.

The Escondido City Council next week is scheduled to take up a proposal that would toss a life-raft at the sinking Escondido Chamber of Commerce. The chamber, by its own admission, is in deep financial trouble due to at least a decade of mismanagement.

The bailout proposal is for the city to take $550,000 out of its general fund to purchase the building that houses the chamber and lease it back in a lease-purchase deal that charges the chamber 3% interest over 20 years. The Wall Street Journal Prime Lending Rate is 3.25%.

A quick check of prevailing commercial lending rates indicates that market rates should be around 4.75% with a seven-year call – meaning the loan would have to be refinanced or rate reset – under the assumption that the property is worth at least $734,000. This is for borrowers with strong financial statements and good cash flow.

When you are borrowing money to keep your business afloat, it’s doubtful you have good cash flow. And, by their own admission, the chamber of commerce’s leaders have admitted the chamber is in a weak financial position.

Les Abshire, the chamber’s recently appointed president and CEO, is a former banker. One would think he is in a position to know what it takes to obtain a loan from a commercial bank. Since the chamber did not get one, I think the conclusion can be drawn that the approach to the city was as lender of last resort.

In a telephone conversation I had with Vice Mayor Olga Diaz, she mentioned the city’s investment policy and how she couldn’t see any way that this arrangement met the guidelines set in the policy. My attempt to obtain a copy of the policy bore no fruit, but I think it’s safe to assume prudent investment policy would require underwriting standards at least as strict as those required from a neighborhood bank.

Yet, Mayor Sam Abed would have Escondido taxpayers believe this is a good deal for the city.

I’m not sure all of the citizens of Escondido, or even a majority, would agree.

Observers inside and outside the city have recognized the Escondido Chamber of Commerce has held a powerful grip on the city’s politics for a number of years.

There is an irony in the name choice given to the most visible no-growth group – “Chamber of Citizens” – that was clearly intended to voice the frustration on the part of voters opposed to the Escondido Chamber of Commerce’s aggressive political stance.

Abshire and the rest of the leadership team at the chamber apparently feel they have the votes necessary to win a quick approval from the city council, and why shouldn’t they? After all, both Mayor Abed and newly installed council appointee John Masson are former chairmen of the organization – Mason chaired the group just last year. Council member Mike Morasco was enthusiastically backed by the chamber for his appointment when Abed ascended to the mayor’s post. Councilman Ed Gallo has expressed his willingness to go along with the deal.

This city council is supposed to be one that understands and appreciates the principals of business. Diaz, an accountant by training and profession, does. Despite the liberal label given to her politics, she’s apparently the only one who recognizes this is a bad financial move for taxpayers.

I am struck by the sudden willingness of this fiscally conservative majority, so intent on building an emergency reserve that it has cut services it has deemed to be peripheral to the city’s mission, to suddenly go on a spending spree.

As presented, the proposal is nothing more than a sop to a lobbying organization that supports the agenda of a city council majority and would use taxpayer money to perpetuate and solidify that majority.

The Escondido Chamber of Commerce should bite the bullet and sell their building – whether to the city or someone else – and move into smaller quarters more fitting their financial situation. In case they haven’t noticed, that’s what their member (and nonmember) businesses do when the going gets tough. Sometimes you have to make hard, even embarrassing decisions. That’s life.

Effinger writes from San Marcos. He can be reached at kirkinsanmarcos@att.net